Tag Archives: Contracts

A while back, I mentioned that I think contracts are bullshit. Some day, I hope to get into a full ontology of contracts, but I doubt many of my readers really have much interest in such things. Instead, I’m going to Start a conversation with a few people I know in real life concerning the nuances of the NAP with regards to contracts.

Would breach of contract be a violation of the non aggression principle? What about scheduled payments in the future, non-compete, and nondisclosure agreements?

Given that I think contracts are bullshit, I bet most people would assume that the answer I have is simple and straightforward: “no”. Of course, I can never let something be simple. For the sake of this discussion, we’ll just assume the definition I expect to use for the full post on the ontology of contracts and say, “a contract is merely an external explication of an agreement between two or more parties”. In other words, Bruce and Alfred come to an agreement concerning their affairs, say a nondisclosure agreement. That agreement exists as a relationship between the two but, for the sake of clarity (given the human condition), they decide to write the entire thing down and, content that the written document explicates the agreement sufficiently, sign the document to signify their provisional assent to the agreement and the accuracy of the document written to reflect that agreement. Then Bruce and Alfred put the document somewhere where it can be referenced but not altered by either Bruce or Alfred.

That’s a contract, right? It sounds pretty similar to a previous discussion we’ve had. So, lets say the agreement is that Bruce will pay Alfred for services rendered at a certain rate so long as Alfred does not let anyone know some secret Bruce is trying to keep, either by actively communicating that information to someone or letting them figure it out on their own through some form of neglect. Would Alfred be aggressing against Bruce by telling the secret? We can certainly agree that doing so would be dishonorable and vicious, but would it be criminal? Another way to ask would be to say “Can Bruce justifiably kill Alfred if he does so?”

I haven’t gone into that issue in full detail yet, either, but the easy way to put it is I stand by Cantwell’s philosophy of paperclips; It is theoretically justifiable to shoot someone over stealing a paperclip. Admittedly, the odds of encountering someone who would both steal a paperclip and allow the situation to escalate to the point of lethal force are statistically negligible and the odds of encountering someone who values the sanctity of one’s ownership of paperclips over the exorbitant cost of a bullet are equally negligible. However, the moral reasoning remains sound, even if the tactical choice would be tolerance.

Why am I talking about lethal force and paperclips when I should be talking about contracts? Well, is Alfred committing a crime against Bruce if he violates the contract? Can Bruce justifiably kill Alfred for doing so? Surely, the cost of the secret is greater than that of a paperclip. Even so, I argue that the secret is of a different category than that of the paperclip. Whereas a paperclip is property, a secret is nothing more than an abstraction of an individual’s ideas. The primary historical role of contracts such as nondisclosure agreements is an attempt to use the law to transmute mental things into material things, which can then be treated as property. So, even though Alfred may be dishonorable and breach his agreement with Bruce, he isn’t “stealing” anything from him.

What recourse would Bruce have in such a circumstance? Under the legal fictions currently in place, contracts are largely treated as laws are: if one violates a contract and then continues to refuse to play by the rules of the contract concerning breach of contract, eventually the issue would escalate to an encounter with law enforcement, which if the dishonorable man still refuses to comply, will be killed by law enforcement. Because of this, the current state of contract law is every contract follows the formula “We agree to do these things. If we don’t do these things, someone’s gonna fucking die.” Just like a law.

The same is the case if Bruce does not pay Alfred for his services, just for the sake of clarification.

I am obviously not impressed with this formula. As such, I have been exploring contract theories and trying to figure out the exact relationship between the ontology of contracts and the nature of the NAP. Thus far, I have found two possible answers to the question above, and they are mutually exclusive. As such, I’m presenting this post as a conversation-starter (as is the custom at this point).

Option #1: Contracts are 100% bullshit. In this case, the reality of the situation is straightforward: caveat emptor. If Bruce and Alfred make an agreement that Alfred will do butler stuff and Bruce will pay him at the end of the month and either one fails to do so, it renders the agreement void. If Alfred fails to do butler stuff, Bruce doesn’t have to pay him and if Bruce doesn’t pay Alfred, he doesn’t have to do butler stuff. The reality is that all that exists is the agreement between the two with their honor and social standing at stake.

While this solution is simple, it does have some complications. For example, the agreement is temporal in nature: Alfred spends a month of his life performing a service for Bruce before not receiving payment or, if paid in advance, Bruce pays a month’s salary before not receiving the agreed upon service. There are a few technologies which can be employed to prevent such instances, but in the words of Sov Tsu: “If you create a technology to solve a moral problem, you didn’t actually solve the problem.” So, instead, I will simply point out the obvious circumstance surrounding contract-violators: if one is living in a society of a reasonable size, there will be little opportunity to violate agreements without destroying one’s reputation and being dishonored or declared an outlaw. These extenuating circumstances are enough to keep a majority of potential frauds at bay, even in our overpopulated cities and towns.

Of the technologies available to increase the effectiveness of social accountability is that of reputation systems (which I generally dislike); one can have an Angie’s list or a yelp which operates much like a credit score: if one doesn’t have enough honor points, you probably don’t want to get into a contract with them. Another is that of outlaw status; if someone violates fundamental social mores, they can be declared an outlaw by the offended parties, which basically puts them outside of the general functioning of society: you breach a contract without making proper amends, you are refused service at many businesses and won’t be defended if someone were to try to rob or kill you.

Or, alternatively, we can look to the free (black) markets that have existed outside of normal contract law since forever and see what technologies exist there. The one that comes to mind right away is that of escrow holdings: Bruce puts Alfred’s payment into an escrow account at the start of the month, to be paid out to Alfred after a month of service, and they place a third party in charge of that account. Another free market device is that of word-of-mouth; someone trusted would have to vouch for the trustworthiness of each party. In this case, Thomas, Bruce’s father, vouched for Alfred and so Bruce trusts him (and vice versa).

There is opportunity for abuse in this resolution, as with any. Reputation systems can be gamed, are open to corruption, and can become oppressive forms of governance as opposed to useful tools for self-actualization. Public shaming is only as effective as a society is homogeneous, culturally speaking. Escrow services work great for payment plans and such, but do nothing with regards to agreements which do not concern direct exchange of goods. This is why self-empowerment, social cohesion, and populations within the Bunbar number are crucial to a truly prosperous society: the natural market functions of such a society drastically mitigate the harm caused by fraudsters and indolence without resorting to the criminal activities of the state.

Option #2: Contracts have a social function and are therefore not 100% bullshit. In this formulation, contracts have impetus insofar as they can be enforced without violation of the NAP. So, unlike laws, I don’t think one could pretend a contract is valid if it were enforced with the same mechanism (“do X, or we’ll fucking kill you.”). If one agrees to arbitration by a third party and consequences for breach-of-contract as part of the agreement, it is conceivable that polycentric legal systems could manage to serve as a lubricant for commerce in societies, both big and small.

This polycentric system of agreed upon contractual obligations (and punishments) and arbitrators is certainly preferable to the monopolized and criminal system currently in-place throughout the developed world. Between the competitive nature of the market for “justice” and the voluntary nature of contracts (in theory, at least), this system would likely produce something resembling courts which maintains a reasonably high level of satisfaction with legal arbitration. Given the versatility of anarcho-capitalist theory concerning polycentric law, I imagine that such competition would demonstrate the forms of contract theory which produce the most utility over time, independent of their truth-value, of course. If I were to venture a guess, of what that would look like, I’m guessing that the theories of Stephan Kinsella will likely produce the most utility as well as most closely reflect the facts of the matter, even if he has more faith in contracts than I do.

There are two problems I see with this position, though. First, the issue of honor still plays an inescapable role in this dilemma: a dishonorable person who will not honor an agreement will be equally unlikely to honor the specific clause concerning retribution or the presumed authority of the courts. Ultimately, then, we find ourselves in the initial situation presented in option #1. Second, I believe the harm-reduction and forward-thinking provided by standard financial and interpersonal practices far outperform any sort of contract and arbitration service beyond that which is contained in standard interpersonal and fiscal practices. What I mean is putting lenders in-charge of their own interest rates and application process will enable market functions to weed out the honorable and dishonorable, as does actually knowing one’s customers, etc.

This obviously didn’t cover all the nuances of contracts and such, but it is a starting place for a discussion. I need to do more research into the old tort systems and read more Stephan Kinsella. For the meanwhile, I propose that contracts are bullshit and one ought to strive to be honorable and surround oneself with honorable people. It couldn’t hurt to keep records of one’s agreements and obligations, though. Really, the approach one ought to take to contracts is the same as one ought to take to any service that is currently monopolized by government: ask “can this service be provided without the intrinsic threat of murder AND does this service have any necessity in a free society?

TL;DR: Contracts are bullshit, but they are still an important area of discussion to AnCaps and normies, alike. Insofar as that discussion applies to my project, I guess I’m halfway obligated to write about them. Contracts really seem to simply exist as an external point of reference for agreements, which are relational between two or more parties. As such, whether or not violating a contract or agreement (fraud, essentially) is a violation of the NAP is what is really at the heart of the discussion. I argue that most, if not all, cases of fraud are not actually violations of the NAP and that the old adage of “caveat emptor” ought to be kept in mind. As such, the initiation of force against a fraudster is, itself, a violation of the NAP. However, all the finer points of contract theory are currently beyond my expertise and from what I know of Stephan Kinsella, he would be the guy to read for ideas.